Wednesday, August 04, 2010

Beware of child identity theft

By Problem Partner Kristin Samuelson | As adults, we're taught to protect our Social Security number as if it were our child. But who is watching our children's numbers? Or worse, who is preying on their clean, unused credit histories?

"Hundreds of online businesses are using computers to find dormant Social Security numbers -- usually those assigned to children who don't use them -- then selling those numbers under another name to help people establish phony credit and run up huge debts they will never pay off," an Aug. 2 Associated Press story said.

Jennifer Leuer, general manager of Experian’s ProtectMyID.com, a provider of identity theft detection, protection and fraud resolution, said she first started receiving complaints about child identity theft seven years ago.

"The Social (Security number) is the key to a lot of identity theft," Leuer said. ”There’s 16 years there that (children) don’t really need the Social (Security number), and it’s such a valuable piece of information in the way that our lending world works."

Here is how the scheme works:

"Online companies use computers and
publicly available information to find random Social Security numbers,"
the AP story said. "The numbers are run through public databases to
determine whether anyone is using them to obtain credit. If not, they
are offered for sale for a few hundred to several thousand
dollars...People who buy the numbers can then quickly build their
credit rating in a process called 'piggybacking,' which involves
linking to someone else's credit file."

Children are not the only people affected by this type of identity theft.

"Homeless people have the same types of problems because they’re not
in the economy," said Lillie Coney, associate director of the Electronic Privacy Information Center. "They’re not applying for credit cards, so
they have dormant credit histories.”

Identity theft is a $50 billion industry that impacted more than 8 million Americans in 2008, according to protectmyid.com.

Federal investigators have not yet figured out how to prosecute the online businesses because Social Security numbers fall in a "legal gray area," according to the AP story.

Social Security numbers were intended for benefits management and tax collection, not to grant credit, Coney said. She believes the problem with this class of identity theft stems from credit card companies improperly using Social Security numbers to grant credit.

“The solution is for (credit granters) to stop using it," Coney said. "Other industries have gotten away from (using Social Security numbers)," Coney said. "The health insurance industry used to put them on their cards. They don’t do that anymore. They learned to get away from that.”

So what can concerned parents do to protect their children's unblemished lines of credit?

If the child is old enough to apply for a job where their employer requests their Social Security number, make sure the position is with a legitimate company, and "not something off CraigsList," Leuer said.

Parents do not need to give their child's Social Security number to youth sports organizations or their doctor's office. "You need to provide information that the health care provider needs for billing, and that’s the member number," Leuer said. "They can still bill the medical member without ever seeing the child’s Social Security number."

"The Department of Revenue is now required to directly notify you, as a taxpayer, if they suspectanother person has used your SSN to register a business or pay taxes and fees," according to IllinoisAttorneyGeneral.gov.

If you set up a bank account for your child, check it to make sure it has no overdraft protection and make sure it is just a savings account, Leuer said.

One red flag Leuer mentioned was receiving pre-approved credit card
offers in the mail in your child's name. In order to receive a
pre-approved credit card offer, there has to be an existing line of
credit open on your credit profile, which means someone has already
used your child's Social Security number. Leuer said parents should be
aware that by opening any line of credit under their child's name, such
as a gasoline card for their 16-year-old child, they have established a
line of credit under that child's name.

Leuer said parents should consider it a good sign if your child's credit report warrants zero results.

"A credit report only kicks in, not at birth, but when you’ve established a credit history," Leuer said. "It’s a red flag if your child has an existing credit report"

If a child has an existing credit report, Coney suggests placing a security freeze on the report, which will prevent a credit reporting company from releasing the credit report without the child's or parent's consent.

"To some degree, protect them until they reach adults," Coney said.

But Leuer warns that placing a security freeze will cause consumers added inconveniences.

"Using a security freeze to take control over who is allowed access to the personal and financial information in your file may delay, interfere with or prohibit the timely approval of any subsequent request or application you make regarding a new loan, credit, mortgage, insurance, government services or payments, rental housing, employment, investment, license, cellular telephone, utilities, digital signature, Internet credit card transaction or other services, including an extension of credit at point of sale."

Coney said by the time most parents realize their child's identity has been stolen, their Social Security number could have been used by multiple people.

"They literally will have to fight for their identity," Coney said. "It's not like they're an adult where someone is trying to interject their fraud in an established credit history. It will be a big argument of 'who does this Social Security number belong to?' In that case, don’t try to fight it. Just get a new one.”

In the unfortunate circumstance that your child's identity has been stolen and you decide to apply for a new Social Security number, make sure to suspend their previous number, Coney said.

Lastly, Coney said parents should tell their elected officials they want enforcement agencies to start fighting identity theft.

"Right now, identity theft is the fastest-growing crime," Coney said.
"It’s low-hanging fruit, but no law enforcement agency is addressing
it. Criminals will go to the place of least resistance."

Comments

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One question:

This morning, I tried to get a credit report for my 6-year-old. Annualcreditreport.com will not show it to me because the credit reporting agencies "do not typically maintain credit histories on children under 13", and directed me to their FAQ, which says I can request a minor's credit report if I suspect fraud. In this case, I have no evidence of fraud - but don't necessarily want to wait that long!

So - is it impossible to receive a credit report for a minor against whom fraud is NOT suspected? I just want proof that my child does not have a credit history. Do I have to wait until I suspect fraud has occured?

If you received that message, I think it is because your child's identity has not been stolen. I found the below information on AnnualCreditReport.com's FAQ page. I would suggest calling the three main credit bureaus and talking to them about your concerns: https://www.annualcreditreport.com/cra/helpfaq#reqchild:

The credit reporting agencies do not knowingly maintain credit files on minor children. If you suspect that your minor child's information has been used fraudulently, you should contact the credit reporting agencies directly and report the illegal use of your child's information to law enforcement. Please supply each credit reporting agency with your child's complete name, address, date of birth and a copy of the minor child's birth certificate and social security card. Additionally, please provide a copy of your driver's license or other government-issued proof of your identity, which includes your current address, and a current utility bill containing your current address so the credit reporting agencies may promptly respond to your request.

If you are a child's legal representative or court ordered guardian, please provide the information listed above and refer to the FAQ entitled How do I request a credit report as a Legal Guardian? for more information.

children under the age of eighteen are NOT responable for debt. If someone should use their S.S. number before the age of consent then it should not be difficult to have it removed from their credit report. Most people donot realize that should you have to dispute something on their credit report you will be disputing with the credit lenders more so then the credit reporting agency. The three major credit reporting agencys only put in their system what the creditor and or lenders tell them to. This is my understanding of how it works.

I am an associate with Pre-Paid Legal Services and Identity Theft Shield. Our Identity Theft program protects children up to the age of 18. If a credit report is created, you are notified and we take care of it. For more information, visit www.prepaidlegal.com/info/davisgroup.